A B&C investigation has found that bridging lender West One Loans has agreed a settlement figure with an investor who sued the firm for failing to obtain security for his loan.

On 1st February 2013 West One Loans agreed to settle a claim with Nick Clarke, owner of Salkeld Investments, after he brought action against the lender for syndicating his £235,000 investment to a fraudster in April 2011.

The exact settlement amount is at this stage undisclosed, however, Nick has previously told B&C that he would not settle for less than his original investment sum, plus interest (agreed at 1 per cent per month), and legal fees he has incurred as a result.

The legal costs are estimated to be in the tens of thousands as the action has been on-going since it materialised that West One Loans failed to register a charge on the security property in 2011.

The court action

When it came to light that the lender had failed to register a charge on the property before advancing the loan, Nick had expected to receive his funds back.

He told B&C: “I was sold this investment on the basis that the loan would be secured. Had I thought that West One was not guaranteeing that this would be the case, I would never have invested.”

West One Loans subsequently failed to repay Nick his £235,000 investment as its lawyer Mr de Verneuil Smith contended that “…the duty of his client was limited to one of taking reasonable care, that it was legally impossible for a lender to obtain a charge over a property before a loan was advanced.”

As a result, Nick informed B&C: “I am very disappointed with West One's conduct … and felt I had no alternative but to pursue this matter through the courts."

A trial date was set for 30th April 2013, however the Settlement Deed between the parties dated 1st February 2013 means this will no longer go ahead.

At the time of the judgement in October 2012, Judge Mackie warned: “If the matter goes to trial the issues will be complex and expensive to try.”

B&C asked West One Loans to comment on the settlement, to which Mark Abrahams, CEO, responded: “Salkeld Investments Limited and West One Loan Limited have reached an agreement dated 1 February 2013 whereby the Parties have resolved the dispute between them to their mutual satisfaction.”   

The case

Nick invested £235,000 as part of a larger £570,000 loan which was paid by West One to a fraudster pertaining to be a Massimo Barbini in April 2011.

As security in respect of the loan, West One Loans would obtain a charge over a property in Fulham, London, owned by Barbini which had an open market valuation of £950,000.

The term of the loan was to be seven months and, throughout this period, West One would pay Clarke a net interest rate of 1 per cent per month on the sum that he had invested.

It was agreed that West One would repay Clarke's investment of £235,000 on or around 19th November 2011.

Salkeld alleged that it and West One Loans entered into a Trust Deed relating to the loan which stated that West One Loans had previously agreed that the loan would be secured by way of a charge over the Fulham property.

Clarke also alleged that it was a term of the contract that West One Loans would not advance any part of the loan to the borrower before it had obtained valid security over the property and that, in the event that the borrower did not repay the loan, it would enforce the security over the property on behalf of Clarke (and any other investors involved in the loan).

West One Loans defended the claim and argued that there was no such absolute obligation upon them to obtain security but that instead they were obliged to instruct solicitors to secure Salkeld's interest by way of a legal charge and that they did in fact do so.

West One Loans advanced the full amount of the loan to an individual who was not Barbini and who did not own, or have any interest in, the property and without having obtained any valid security over the property.

When West One Loans tried to register a charge over the property it was refused by HM Land Registry on this basis.